Hit or miss? The challenge of targeting

In Part 1 of this article, I looked at the effects of the government’s fees-free policy on participation in tertiary education.

That analysis concluded that:

The policy has deadweight effects in that it provides a benefit to many people who receive that benefit for doing exactly what they had always intended to do and which they would have otherwise willingly paid for.

It is regressive as those who don’t participate in tertiary education (and so don’t benefit from the policy) are disproportionately from lower socio-economic status (SES) groups – in other words, its effect is to move resources from low SES groups to higher SES groups.

The effects of the scheme on barriers to access to tertiary education were slight or non-existent; the scheme is poorly targeted.

This analysis raises the question of how we might devise policies that actually do address problems of access to tertiary education. Shouldn’t the government be using its rich evidence base to direct its welfare to those whose circumstances mean that they are less likely to enrol, to reducing barriers to access, rather than supporting the well-off who will enrol anyway? This part looks at addressing access issues and in targeting resources at access.

Our record in targeting

Fees-free isn’t the only example of weak targeting or regressive policy in our tertiary education system.

Targeting in student allowances

Look at our student allowances scheme. The scheme was modified in 1992 to dovetail with the new loans scheme, introduced that year. Students were expected to borrow to cover their living costs; allowances were available, in lieu of loans for living costs, to young students only if their family income was modest.

The targeting of student allowances was changed over 2004 to 2008 as the government kept lifting the family income thresholds. While the targeting in the allowances scheme was intended to provide greater support for students from low-income families (who are seen as more debt-averse), the progressive changes to those thresholds mean that a (partial) student allowance is now available to those with annual family incomes of a comfortable $100,000 a year – not exactly affluent but really poor either.

There has been no systematic analysis of where those limits should be set in order to focus allowances on those who might otherwise be deterred from study.

The main reason, of course, is politics. The notion of a universal student allowance has been an article of faith for generations of student lobbyists who have been remarkably successful in pushing governments in that direction. It’s a brave government that would take on that argument!

The most interesting example of targeting in the student allowances scheme is allowances for postgraduates. In 2013, the government changed the rules so that postgraduate students became ineligible for allowances and therefore, were dependent on borrowing to help meet their living costs. The rationale: allowances are designed to foster participation; but postgraduates, by definition, all have a record of successful participation and, in any case, stand to have high earnings following study.

Removing allowances had no effect on participation in postgraduate programmes – sophisticated, independent research found no evidence that this policy change “… affected the number or type of postgraduate entrants, their choice between part-time and full-time study, the amount of paid work they performed while studying, or their rates of dropping out”. What the researchers found was that postgraduates “… increased their student loan borrowing for living expenses.” In other words, the 2013 change had precisely the intended effect – it shifted students from allowances to loans, without any adverse effects. Student leaders have lobbied actively for the reversal of the 2013 change. Labour included the restoration of allowances eligibility in its manifesto at the 2017 election but have since stated that it’s not a priority for the first term. And little wonder!

Student loans

The most obvious example of regressive tertiary education policy is interest-free student loans. That policy increased the level of subsidy in the loan scheme, so that the cost of lending a dollar now hovers around 40 cents. Because there is no targeting in the scheme, and because of the high propensity of those from middle- and upper-middle income families to take tertiary education, the scheme ends up allocating greater levels of subsidy to those higher income groups – that is, it is regressive.

Interest-free loans didn’t increase participation either. Not that the policy was intended to do so; rather, with the removal of interest, the government set out to settle the decade-long, acrimonious debate about the fairness of the loan scheme by shifting more of the cost of loans from students to government. In that, it succeeded; it created a new political consensus on the loan scheme.

And, as well, there was a political point to interest-free loans. This was one of the flagship policies of a Labour-led government aiming to win a third term in office in the very tight 2005 election. The policy wasn’t aimed at students – the government could count on their votes anyway. Rather, it was directed at middle-aged and elderly middle-class voters who were spooked by the debt burden of their children and grandchildren. In that, too, it succeeded. In the parliamentary debate on the interest-free loans legislation in December 2005, senior National MPs were critical of the policy but conceded that it had been decisive in the election outcome. The rejoinder of one Labour MP summed up the policy intent succinctly and smugly: “We won! You lost!”

It’s hard not to think that the current government’s 2017 fees-free policy was intended to create the same sort of momentum, with its direct appeal to parents and grandparents – just as, in the 2017 UK election, the British Labour party used the promise of the abolition of £9,000 university fees as an appeal to core Conservative voters, many of whom had (or expected to have) children or grandchildren in study; the announcement of that policy was greeted with a big shift in the opinion polls.

How to target

So how should the government target its spending better? How should it address problems in access to tertiary education?

An excellent 2018 report, by Ministry of Education researcher, David Earle, is the most comprehensive and rigorous study yet of access to tertiary education in New Zealand. It provides a blueprint for what not to do to address barriers to access.

Applying statistical techniques to control for all these variables, Earle has worked out which factors are associated with risk of non-participation in tertiary education at Level 4 or above.

Unsurprisingly, he finds that achievement and performance at school dwarfs other factors. But after controlling for school performance, some other factors also play a part. For instance, people whose parents have higher qualifications are more likely to enter tertiary education at Level 4 or above. Students who grow up in more deprived neighbourhoods are less likely to enrol, even once other factors are controlled for. Māori are less likely than the general population to go on to higher education, even if they have done well at school. People who use mental health services are less likely to advance to higher levels of education.

However, many of the dozens of other variables tested in this study have no significant influence on participation in higher education once school performance is taken into account. These include parental income, truancy and family transience.

The inference from Earle’s research is that interventions that target factors shown to be not statistically significant should be quietly set aside. For instance, given that parental income wasn’t found to be significant, interventions directed at lifting participation of young people from low-income families by reducing costs are not likely to work, given current student support policies. It’s no surprise that a financially-focused access initiative – like the current fees-free policy – had minimal effect on participation.

What this suggests is that access initiatives should focus on lifting school achievement among those groups which the research shows are less likely to participate – those raised in low SES areas, Māori, those whose families have lower educational achievement. The University of Auckland’s StarPath programme, with its emphasis on improving school achievement through changing practices in lower decile secondary schools, is an example of an intervention that targets the right things.

That’s a quite different form of intervention. It’s not as straightforward as removing fees. It may take longer. It might attract less notice and generate fewer votes. But it might just work.